New Single Family Home Sales Jump 14.1 Percent Vs A Year Ago in May 2018, Median Price Down 3.3 Percent to $313,000

New single family residential (SFR) home sales of 689,000 on seasonally adjusted annualized rate (SAAR) were up 14.1 percent versus a year ago and 6.7 percent sequentially from April. Other than the 712,000 SAAR rate posted in November 2017, this is the greatest level seen since October 2007. Year-to-date new home sales are up 8.8 percent compared to the same period a year ago.

There were an estimated 299,000 new homes available for sale at the end of May 2018 equating to 5.2 months inventory on a seasonally adjusted basis. In comparison, existing home inventory for the same period was 3.8 months.

New home sales are counted differently than existing home transactions. An existing home sale is tallied when the property actually closes and ownership transfers from the seller to the buyer. New home sales are counted at the time the contract is signed. In some extreme circumstances for a counted new home sale, construction may not have yet commenced and that specific transaction may not close. As a result, new home sales often have material revisions from one month to the next.

Median new-home price of $313,000, was down 3.3 percent versus the same month a year ago. The average new home price at $368,500 was down 2.6 percent versus a year ago. Declining prices are a result of builders increasing construction of entry-level homes (rather than the higher-priced move-up market) and rising interest rates.

The following graph shows new home sales on a SAAR and monthly median prices since January 2007.

Commencing 2001, the median new home price has averaged 22.9 percent greater than the median existing home price. From 2001 through 2006, new home prices were typically 10.9 percent greater than the corresponding existing home price. Since 2014, new home median prices have averaged 31.6 percent greater than existing homes. New home median prices in the last six-months were an average 30.0 percent greater than existing home transactions. In March, April and May 2018, however, new home prices were 35 percent, 21.1 percent and 18.2 percent greater, respectively, than existing home sales.

New home sales volatility is not systematic across the U.S. The U.S. Census Bureau reports these data on a national and regional basis, delineated as follows:

The next table shows year-over-year changes for the U.S. and the four major geographic regions comparing May 2018 to May 2017. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy. The same is true regarding the number of new home sales on a regional basis. Other factors such as job growth, rental rates and comparative price of existing home sales, along with availability come into play.

The next table shows regional home sales as a percentage of national home sales, along with the change from May 2017 to May 2018. Note that more than eight-out-of-every 10 new home sales are either in the South or the West, with six-out-of-every 10 sales (59.4 percent) in the South as of May.

New and existing home median prices are shown in the following graph commencing in 2001, prior to the start of the housing bubble.

Fannie Mae’s June 2018 forecast expects an 11.2 percent increase in new single family home sales from 2017 to 2018 and a 4.3 percent gain from 2018 to 2019. The Mortgage Bankers Association June 2018 forecast shows new home sales rising 6.0 percent in 2018 year-over-year and 2.1 percent in 2019.